Microsoft drops AI datacentre project in Essex over power supply concerns

Microsoft has pulled out as the anchor tenant for Nscale’s planned Loughton, Essex AI datacentre after being told the local grid cannot supply sufficient power until the early-to-mid 2030s. The development, touted by ministers as the UK’s largest sovereign AI datacentre and due to open next year, has already faced scrutiny for its unfinished site; the loss of Microsoft leaves Nscale without any publicly announced customers for Loughton. Nscale, backed by Nvidia and aiming to position itself as a British “neocloud,” says it remains committed, is investigating onsite power generation and alternative sites, and insists its broader relationship with Microsoft and other contracts are intact. UK Power Networks’ capacity constraint triggered the collapse of the Loughton deal, and Microsoft remains involved with a separate Nscale project in Norway.

The setback exposes broader vulnerabilities in the rapid AI datacentre build-out: heavy grid dependence, long connection lead times, and firms taking on sizable debt to chase growth. Nscale’s planned New York float - targeting a potential $35bn valuation and supported by board figures such as Nick Clegg and Sheryl Sandberg - now faces greater risk if Loughton is delayed or derailed. The episode underscores how energy constraints and infrastructure bottlenecks, not just financing or planning, are key obstacles to the UK’s AI strategy and to the viability of neocloud business models.